SBI looks to raise $1.5 bn through overseas debt
24 August 2016
NPA-laden State Bank of India (SBI) is looking to raise up to Rs11,000 crore (about $1.5 billion) through private placement of dollar or rupee denominated debt instruments from Indian or overseas investors in order to boost capital.
SBI, the country's largest lender, said it will raise up to Rs11,000 crore through Basel III compliant perpetual debt instruments on a private placement basis.
SBI today said its committee of directors for capital raising had authorised the bank to raise Rs11,100 crore worth additional Tier-I (AT-1) capital through issuance of Basel III-compliant perpetual debt instruments.
"The Committee of Directors for Capital Raising at its meeting held on 24 August 2016 authorised the bank to raise up to Rs11,100 crore additional tier 1 capital, by way of issue of Basel III compliant perpetual debt instrument in USD and / or INR, at par, through private placement to overseas and / or Indian investors," the bank stated in BSE filing.
These perpetual debt instruments will be issued in dollar or rupee terms through private placements to domestic and / or international investors, in as many tranches as it may be considered appropriate by the lender, SBI said in its notification to the stock exchanges.
The debt issue comes at a time when SBI is working on a plan to merge its five associate banks - State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Mysore, State Bank of Patiala and State Bank of Hyderabad - and Bharatiya Mahila Bank with itself.
Public sector lenders have increasingly been falling back on bond issues to raise funds but, with massive losses that have piled up in 2015-16, with some making losses even in the first quarter of 2016-17, banks are fast running out of distributable reserves to service debt, say analysts.
According to rating agency Icra, five out of the 21 public sector lenders it tracked have negative or very low distributable reserves as of 31 March.
On a cumulative basis, public sector banks have issued about Rs17,000 crore worth of AT-1 bonds since 2007 when the RBI first allowed such issuances. IDBI Bank raised Rs1,500 crore through these bonds on Tuesday. The coupon payments are dearer as these bonds were raised at over 10 per cent yield.